What changed in this filing

/stocks — the workspaceLOADING

Item 1. Financial Statements

2020-08-07 compared with 2020-05-14 · 182 added, 129 removed, 570 unchanged (35% of the section changed)

4 unchanged sentences

Three Months Ended

Six Months Ended

Net operating revenues:

10 unchanged sentences

Selling, general and administrative expenses

Operating loss

Operating income (loss)

Other income (expense):

1 unchanged sentence

Other income, net

Loss before income taxes

Income (loss) before income taxes

Provision for income taxes

Net income (loss)

Less net loss attributable to non-controlling interest in subsidiary

Net loss attributable to Avalon Holdings Corporation common shareholders

Loss per share attributable to Avalon Holdings Corporation common shareholders:

Basic and diluted net loss per share

Weighted average shares outstanding - basic and diluted

Net income (loss) attributable to Avalon Holdings Corporation common shareholders

Income (loss) per share attributable to Avalon Holdings Corporation common shareholders:

Basic net income (loss) per share

Diluted net income (loss) per share

Weighted average shares outstanding - basic

Weighted average shares outstanding - diluted

See accompanying notes to unaudited condensed consolidated financial statements .

4 unchanged sentences

Cash and cash equivalents

Accounts receivable, less allowance for doubtful accounts of $277 at March 31, 2020 and $275 at December 31, 2019

Accounts receivable, less allowance for doubtful accounts of $271 at June 30, 2020 and $275 at December 31, 2019

Unbilled membership dues receivable

36 unchanged sentences

(in thousands , except for share data )

For the Three Months Ended March 31, 2020

For the Three Months Ended June 30, 2020

Non-controlling

Shareholders'

Balance at April 1, 2020

Stock options - compensation costs

Balance at June 30, 2020

For the Three Months Ended June 30, 2019

Non-controlling

Shareholders'

Balance at April 1, 2019

Stock options - compensation costs

Net income (loss)

Balance at June 30, 2019

See accompanying notes to unaudited condensed consolidated financial statements.

AVALON HOLDINGS CORPORATION AND SUBSIDIARIES

Condensed Consolidated Statement of Shareholders’ Equity (Unaudited)

(in thousands , except for share data )

For the Six Months Ended June 30, 2020

Non-controlling

Shareholders'

Balance at January 1, 2020

Stock options - compensation costs

Balance at March 31, 2020

For the Three Months Ended March 31, 2019

Balance at June 30, 2020

For the Six Months Ended June 30, 2019

Non-controlling

2 unchanged sentences

Stock options - compensation costs

Balance at March 31, 2019

Balance at June 30, 2019

See accompanying notes to unaudited condensed consolidated financial statements.

2 unchanged sentences

(in thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Cash flows from operating activities:

Reconciliation of net loss to cash used in operating activities:

Reconciliation of net loss to cash provided by operating activities:

Depreciation and amortization expense

2 unchanged sentences

Provision for losses on accounts receivable

Loss from disposal of equipment

(Gain) loss from disposal of equipment

Change in operating assets and liabilities, net of effect of acquisition

8 unchanged sentences

Other liabilities and accrued expenses

Net cash used in operating activities

Net cash provided by operating activities

Cash flows from investing activities:

Capital expenditures

Payments related to acquisition of New Castle Country Club

Proceeds from disposal of vehicle

Net cash used in investing activities

1 unchanged sentence

Proceeds under term loan facility

Proceeds under Paycheck Protection Program

Payments of debt issuance costs

Principal payments on term loan facilities

Repayment under line of credit facility

Principal payments on finance lease obligations

Net cash provided by (used in) financing activities

Increase (decrease) in cash, cash equivalents and restricted cash

Net cash provided by financing activities

Increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash at beginning of period

4 unchanged sentences

Significant non-cash investing and financing activities:

Operating lease right-of-use assets in exchange for lease obligaitons

Operating lease right-of-use assets in exchange for lease obligations

Finance lease obligations incurred

Acquisition of New Castle Country Club real property in exchange for assumption of outstanding debt

Cash paid during the period for interest

3 unchanged sentences

Notes to Unaudited Condensed Consolidated Financial Statements

March 31, 2020

June 30, 2020

Description of Business

12 unchanged sentences

All significant intercompany accounts and transactions have been eliminated in consolidation.

In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position of Avalon as of March 31, 2020, and the results of its operations and cash flows for the interim periods presented.

In the opinion of management, these unaudited condensed consolidated financial statements include all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of the financial position of Avalon as of June 30, 2020, and the results of its operations and cash flows for the interim periods presented.

The operating results for the interim periods are not necessarily indicative of the results to be expected for the full year.

We expect the effects of the coronavirus/COVID-19 pandemic (collectively referred to herein as "COVID-19") to adversely impact our financial position, results of operations, and cash flows in fiscal year 2020.

The coronavirus/COVID-19 pandemic (collectively referred to herein as "COVID-19") has adversely impacted our financial position, results of operations, and cash flows for the first six months of 2020.

The unaudited Condensed Consolidated Financial Statements presented herein reflect our current estimates and assumptions that affect the reported amounts of assets and liabilities and related disclosures as of the date of the financial statements and reported amounts of revenues and expenses during the reporting periods presented.

20 unchanged sentences

The following table provides a reconciliation of cash, cash equivalents and restricted cash reported within the Condensed Consolidated Balance Sheets that sum to the total of the same such amounts shown in the Condensed Consolidated Statements of Cash Flows.

Cash, cash equivalents and restricted cash consist of the following at March 31, 2020 and December 31, 2019 (in thousands):

Cash, cash equivalents and restricted cash consist of the following at June 30, 2020 and December 31, 2019 (in thousands):

Cash and cash equivalents

21 unchanged sentences

Operations of the salt water injection wells have been suspended in accordance with the Chief of the Division of Oil and Gas Resources Management order (See Note 15).

Due to the suspension of the salt water injection wells, there were no operating revenues for the three months ended March 31, 2020 and 2019.

For the three months ended March 31, 2020 and 2019, the net operating revenues related to waste management services represented approximately 77% and 78%, respectively, of Avalon’s total consolidated net operating revenues.

For both the three months ended March 31, 2020 and 2019, no one customer individually accounted for 10% or more of Avalon’s waste management services segment revenues.

Due to the suspension of the salt water injection wells, there were no operating revenues for the three and six months ended June 30, 2020 and 2019.

For both the three months ended June 30, 2020 and 2019, the net operating revenues related to waste management services represented approximately 70% of Avalon’s total consolidated net operating revenues.

For both the six months ended June 30, 2020 and 2019, the net operating revenues related to waste management services represented approximately 74% of Avalon’s total consolidated net operating revenues.

For both the six months ended June 30, 2020 and 2019, no one customer individually accounted for 10% or more of Avalon’s waste management services segment revenues.

For our waste management services contracts, the customer contracts with us to provide a series of distinct waste management services over time which integrates a set of tasks (i.e.

26 unchanged sentences

Due to adverse weather conditions, net operating revenues relating to the golf courses, which are located in northeast Ohio and Pennsylvania, were minimal during the first three months of 2020 and 2019.

For the three months ended March 31, 2020 and 2019, the net operating revenues related to the golf and related operations represented approximately 23% and 22%, respectively, of Avalon’s total consolidated net operating revenues.

For both the three months ended March 31, 2020 and 2019, no one customer individually accounted for 10% or more of Avalon’s golf and related operations segment revenues.

For both the three months ended June 30, 2020 and 2019, the net operating revenues related to the golf and related operations represented approximately 30% of Avalon’s total consolidated net operating revenues.

For both the six months ended June 30, 2020 and 2019, the net operating revenues related to the golf and related operations represented approximately 26% of Avalon’s total consolidated net operating revenues.

For both the six months ended June 30, 2020 and 2019, no one customer individually accounted for 10% or more of Avalon’s golf and related operations segment revenues.

For Avalon’s golf and related operations, the Avalon Golf and Country Club offers membership packages for use of the country club facilities and its related amenities.

19 unchanged sentences

Amounts paid in advance, such as deposits on overnight lodging or for banquet or conferences facilities, are recorded as a liability until the goods or services are provided to the customer (see Contract Liabilities below).

The following table presents our net operating revenues disaggregated by revenue source for the three months ended March 31, 2020 and 2019 (in thousands).

The following table presents our net operating revenues disaggregated by revenue source for the three and six months ended June 30, 2020 and 2019 (in thousands).

Sales and other taxes are excluded from revenues.

Three Months Ended

Six Months Ended

Waste management and brokerage services

12 unchanged sentences

The amounts due are stated at their net realizable value.

At March 31, 2020 and December 31, 2019, accounts receivable, net, related to our waste management services segment were approximately $9.1 million and $11.0 million, respectively.

At March 31, 2020 one customer accounted for approximately 10% of the waste management services segment’s receivables and 8% of the consolidated receivables.

At June 30, 2020 and December 31, 2019, accounts receivable, net, related to our waste management services segment were approximately $6.1 million and $11.0 million, respectively.

No one customer of the waste management services segment accounted for 10% or more of Avalon’s waste management services segment or consolidated net receivables at June 30, 2020.

At December 31, 2019 one customer accounted for approximately 14% of the waste management services segment’s receivables and 13% of the consolidated receivables.

Accounts receivable, net, related to our golf and related operations segment were approximately $1.9 million at March 31, 2020 and $1.0 million at December 31, 2019.

No one customer of the golf and related operations segment accounted for 10% or more of Avalon’s golf and related operations segment or consolidated net receivables at March 31, 2020 or December 31, 2019.

Accounts receivable, net, related to our golf and related operations segment were approximately $1.7 million at June 30, 2020 and $1.0 million at December 31, 2019.

No one customer of the golf and related operations segment accounted for 10% or more of Avalon’s golf and related operations segment or consolidated net receivables at June 30, 2020 or December 31, 2019.

The Company maintains an allowance for doubtful accounts to provide for the estimated amount of receivables that will not be collected.

3 unchanged sentences

Payments subsequently received on such receivables are credited to the allowance for doubtful accounts, or to income, as appropriate under the circumstances.

Allowance for doubtful accounts was approximately $0.3 million at both March 31, 2020 and December 31, 2019.

Allowance for doubtful accounts was approximately $0.3 million at both June 30, 2020 and December 31, 2019.

On January 1, 2020, the Company adopted the guidance under ASU 2016-13.

1 unchanged sentence

The adoption, which was applied on a modified retrospective basis, did not have an impact on the Company's financial condition and results of operations and therefore did not result in an adjustment to retained earnings as of January 1, 2020.

The following table presents changes in our allowance for doubtful accounts during the three months ended March 31, 2020 and 2019 (in thousands):

The following table presents changes in our allowance for doubtful accounts during the three and six months ended June 30, 2020 and 2019 (in thousands):

Beginning of Period

1 unchanged sentence

Allowance for doubtful accounts

Three months ended March 31, 2020

Three months ended March 31, 2019

Three months ended June 30, 2020

Three months ended June 30, 2019

Six months ended June 30, 2020

Six months ended June 30, 2019

Contract Assets

2 unchanged sentences

Contract assets related to unbilled membership dues are classified as current as revenue related to such agreements is recognized within the annual membership period.

Unbilled membership receivables in our Condensed Consolidated Balance Sheets were approximately $0.8 million at March 31, 2020 and $0.6 million at December 31, 2019.

The following table presents changes in our contract assets during the three months ended March 31, 2020 and 2019 (in thousands):

Unbilled membership receivables in our Condensed Consolidated Balance Sheets were approximately $1.1 million at June 30, 2020 and $0.6 million at December 31, 2019.

The following table presents changes in our contract assets during the three and six months ended June 30, 2020 and 2019 (in thousands):

Beginning of Period

2 unchanged sentences

Unbilled membership dues receivable

Three months ended March 31, 2020

Three months ended March 31, 2019

Three months ended June 30, 2020

Three months ended June 30, 2019

Six months ended June 30, 2020

Six months ended June 30, 2019

Contract Liabilities

2 unchanged sentences

We classify deferred membership dues revenue as current based on the timing of when we expect to recognize revenue for the membership commitment based on the Company satisfying the stand ready performance obligation throughout the annual membership period.

The unrecognized or deferred revenues related to membership dues in our Condensed Consolidated Balance Sheets at March 31, 2020 and December 31, 2019 were $4.0 million and $3.2 million, respectively.

The unrecognized or deferred revenues related to membership dues in our Condensed Consolidated Balance Sheets at June 30, 2020 and December 31, 2019 were $4.8 million and $3.2 million, respectively.

Customer advance deposits are recorded as a liability until the goods or services are provided to the customer.

1 unchanged sentence

The unrecognized revenues related to customer advance deposits are recorded in “Other liabilities and accrued expenses” in our Condensed Consolidated Balance Sheets.

Customer advance deposits were approximately $0.6 million at March 31, 2020 and December 31, 2019.

The following table presents changes in our contract liabilities during the three months ended March 31, 2020 and 2019 (in thousands):

Customer advance deposits were approximately $0.7 million at June 30, 2020 and $0.6 million at December 31, 2019.

The following table presents changes in our contract liabilities during the three and six months ended June 30, 2020 and 2019 (in thousands):

Beginning of Period

2 unchanged sentences

Deferred membership dues revenue

Three months ended March 31, 2020

Three months ended March 31, 2019

Three months ended June 30, 2020

Three months ended June 30, 2019

Six months ended June 30, 2020

Six months ended June 30, 2019

Customer advance deposits

Three months ended March 31, 2020

Three months ended March 31, 2019

Three months ended June 30, 2020

Three months ended June 30, 2019

Six months ended June 30, 2020

Six months ended June 30, 2019

Property and Equipment

6 unchanged sentences

Interest costs are capitalized on significant construction projects.

Property and equipment at March 31, 2020 and December 31, 2019 consists of the following (in thousands):

Property and equipment at June 30, 2020 and December 31, 2019 consists of the following (in thousands):

Land and land improvements

5 unchanged sentences

Property and equipment, net

At March 31, 2020, the Company did not have any significant fixed contractual commitments for construction projects.

At June 30, 2020, the Company did not have any significant fixed contractual commitments for construction projects.

Avalon reviews the carrying value of its long-lived assets whenever events or changes in circumstances indicate that its carrying amount may not be recoverable.

3 unchanged sentences

or if quoted market prices are not available, Avalon would discount the expected estimated future cash flows.

In the first quarter of 2020 and 2019, no triggering events were present.

During the first six months of 2020 and 2019, no triggering events were present.

Operating Leases

2 unchanged sentences

Our operating leases have remaining lease terms ranging from 1 to 5 years.

The weighted average remaining lease term on operating leases was approximately 3.2 years at March 31, 2020.

The weighted average remaining lease term on operating leases was approximately 3.1 years at June 30, 2020.

In connection with the purchase of New Castle Country Club’s real property assets on May 13, 2019, the Company assumed the remaining term of New Castle Country Club’s golf cart operating lease.

1 unchanged sentence

The golf cart operating lease had a remaining lease term of 3 years at the acquisition date (See Note 16).

In addition, subsequent to the purchase, the Company also entered into new operating lease agreements for additional golf and maintenance carts.

In addition, subsequent to the purchase, the Company entered into new operating lease agreements for golf and maintenance carts.

The Company recorded an operating lease right-of-use asset and corresponding obligation under operating leases of approximately $194,000.

Leased property and associated obligations under operating leases at March 31, 2020 and December 31, 2019 consists of the following (in thousands):

During the first six months of 2020, the Company entered into a new operating lease agreement for hotel furniture.

The Company recorded an operating lease right-of-use asset and corresponding obligation under the operating lease of approximately $266,000.

Leased property and associated obligations under operating leases at June 30, 2020 and December 31, 2019 consists of the following (in thousands):

Operating lease right-of-use assets

2 unchanged sentences

Total obligations under operating leases

The weighted average discount rate on operating leases was 5.01% at March 31, 2020 and December 31, 2019.

The weighted average discount rate on operating leases was 4.96% at June 30, 2020 and 5.01% at December 31, 2019.

Finance Leases

4 unchanged sentences

Based upon the amount of leasehold improvements already made, Avalon expects to exercise all its remaining renewal options.

At March 31, 2020 there were approximately 33.6 years remaining on the golf course and related facilities finance lease.

At June 30, 2020 there were approximately 33.3 years remaining on the golf course and related facilities finance lease.

In addition, the golf and related operations also entered into lease agreements for vehicles, golf course maintenance and restaurant equipment and the captive landfill operations entered into lease agreements for equipment which were determined to be finance leases.

At March 31, 2020, the vehicles, golf course maintenance and restaurant equipment and the landfill operations equipment have remaining lease terms ranging from 1 to 5 years.

The weighted average remaining lease term on the vehicles and equipment leases was approximately 2.2 years at March 31, 2020.

Leased property and associated obligations under finance leases at March 31, 2020 and December 31, 2019 consists of the following (in thousands):

At June 30, 2020, the vehicles, golf course maintenance and restaurant equipment and the landfill operations equipment have remaining lease terms ranging from 1 to 5 years.

The weighted average remaining lease term on the vehicles and equipment leases was approximately 3.2 years at June 30, 2020.

Leased property and associated obligations under finance leases at June 30, 2020 and December 31, 2019 consists of the following (in thousands):

Leased property under finance leases

4 unchanged sentences

Total obligations under finance leases

The weighted average discount rate on finance leases was 5.2% at March 31, 2020 and December 31, 2019.

For the three months ended March 31, 2020 and 2019, components of lease expense were as follows (in thousands):

The weighted average discount rate on finance leases was 4.7% at June 30, 2020 and 5.2% at December 31, 2019.

For the three and six months ended June 30, 2020 and 2019, components of lease expense were as follows (in thousands):

Three Months Ended

Six Months Ended

Operating lease cost:

4 unchanged sentences

Total finance lease cost

Future commitments under long-term, operating and finance leases at March 31, 2020 are as follows (in thousands):

Future commitments under long-term, operating and finance leases at June 30, 2020 are as follows (in thousands):

Total lease payments

2 unchanged sentences

Long-term portion of obligations under leases

Basic and Diluted Net Loss p er Share

Basic and Diluted Net Income ( Loss ) p er Share

Basic net loss per share attributable to Avalon Holdings Corporation common shareholders is computed by dividing the net loss by the weighted average number of common shares outstanding.

For both the three months ended March 31, 2020 and 2019, the weighted average number of common shares outstanding was 3,875,431.

For both the three and six months ended June 30, 2020 and 2019, the weighted average number of common shares outstanding was 3,875,431.

Diluted net income (loss) per share attributable to Avalon Holdings Corporation common shareholders is computed by dividing net income (loss) by the weighted average number of common shares outstanding plus any weighted common equivalent shares determined to be outstanding during the period using the treasury method.

The weighted common equivalent shares included in the calculation are related to stock options granted by Avalon where the weighted average market price of Avalon’s common stock for the period presented is greater than the option exercise price of the stock option.

For the three months ended March 31, 2020, the diluted per share amount is equal to the basic per share amount because the average market price of Avalon’s common shares during the period was less than the exercise price of the stock options outstanding.

For the three months ended March 31, 2019, the diluted per share amount reported is equal to the basic per share amount because Avalon was in a net loss position and as a result, such dilution would be considered anti-dilutive.

Assuming dilution, the weighted average number of common shares outstanding for the three months ended March 31, 2019 was 3,942,762.

For both the three and six months ended June 30, 2020, the diluted per share amount reported is equal to the basic per share amount because Avalon was in a net loss position and as a result, such dilution would be considered anti-dilutive.

Assuming dilution, the diluted per share amount is equal to the basic per share amount because the average market price of Avalon’s common shares during the period was less than the exercise price of the stock options outstanding.

For the three months ended June 30, 2019, the diluted weighted average number of shares outstanding was 3,893,956.

For the six months ended June 30, 2019, the diluted per share amount reported is equal to the basic per share amount because Avalon was in a net loss position and as a result, such dilution would be considered anti-dilutive.

Assuming dilution, the weighted average number of common shares outstanding for the six months ended June 30, 2019 was 3,918,225.

Term Loan s and Line of Credit Agreements

3 unchanged sentences

The remaining proceeds were deposited into a project fund account for which those proceeds are required to fund future costs of renovating and expanding both The Grand Resort and Avalon Field Club at New Castle.

At closing, $10.3 million of the proceeds were used to pay off and refinance amounts outstanding under our term loan agreement with Laurel Capital Corporation, dated December 20, 2016 (“2016 Term Loan Agreement”), $2.9 million of the proceeds were used to pay off and refinance amounts outstanding under our term loan agreement with Laurel Capital Corporation, dated March 29, 2019 (“2019 Term Loan Agreement”), $1.7 million of the proceeds were used to pay down the outstanding balance and associated interest on our existing line of credit agreement with Home Savings Bank, dated May 31, 2018, as amended, $0.6 million of the proceeds were used to pay off amounts outstanding under our commercial mortgage agreement with Mercer County State Bank, dated May 13, 2019 (“Commercial Mortgage”) and $0.3 million of the proceeds were utilized to pay transaction costs.

At closing, $10.3 million of the proceeds were used to pay off and refinance amounts outstanding under our term loan agreement with Laurel Capital Corporation, dated December 20, 2016 (“2016 Term Loan Agreement”), $2.9 million of the proceeds were used to pay off and refinance amounts outstanding under our term loan agreement with Laurel Capital Corporation, dated March 29, 2019 (“2019 Term Loan Agreement”), $1.7 million of the proceeds were used to pay down the outstanding balance and associated interest on our existing line of credit agreement with Premier Bank (formerly Home Savings Bank), dated May 31, 2018, as amended, $0.6 million of the proceeds were used to pay off amounts outstanding under our commercial mortgage agreement with Mercer County State Bank, dated May 13, 2019 (“Commercial Mortgage”) and $0.3 million of the proceeds were utilized to pay transaction costs.

The remaining proceeds of approximately $7.2 million were deposited into a project fund account.

At March 31, 2020 and December 31, 2019, loan proceeds of $5.5 and $7.2 million, respectively, are presented in the Condensed Consolidated Balance Sheets as “Restricted cash.”

At June 30, 2020 and December 31, 2019, loan proceeds of $4.9 million and $7.2 million, respectively, are presented in the Condensed Consolidated Balance Sheets as “Restricted cash.”

The 2016 Term Loan Agreement, 2019 Term Loan Agreement and the Commercial Mortgage Agreement were terminated in conjunction with the New Term Loan Agreement.

7 unchanged sentences

Borrowings under the New Term Loan Agreement are secured by certain real property and related business assets as defined in the agreement.

The New Term Loan Agreement also contains certain financial and other covenants, customary representations, warranties and events of default.

Avalon was in compliance with the New Term Loan Agreement covenants at March 31, 2020 and December 31, 2019.

The New Term Loan Agreement contains a Fixed Charge Coverage Ratio requirement of at least 1.20 tested on an annual basis on December 31 of each year commencing December 31, 2020.

The New Term Loan also contains other nonfinancial covenants, customary representations, warranties and events of default.

Avalon was in compliance with the New Term Loan Agreement covenants at June 30, 2020 and December 31, 2019.

The Company capitalized approximately $0.4 million of debt issuance costs in connection with the New Term Loan Agreement.

2 unchanged sentences

Line of Credit Agreement

On May 31, 2018, Avalon entered into a new business loan agreement with Home Savings Bank, (the “Line of Credit Agreement”) which provides for a line of credit of up to $5.0 million with an original maturity date of May 31, 2020.

On June 17, 2019, the Company amended the Line of Credit Agreement to extend the maturity date to May 31, 2021.

On May 31, 2018, Avalon entered into a business loan agreement with Premier Bank (formerly Home Savings Bank), (the “Line of Credit Agreement”) which provides for a line of credit of up to $5.0 million.

On August 5, 2020, the Company amended the Line of Credit Agreement to extend the maturity date to July 31, 2022.

Under the Line of Credit Agreement, borrowings in excess of $1.0 million are subject to a borrowing base which is calculated based off a specific level of eligible accounts receivable of the waste management business as defined in the agreement.

The existing line of credit agreement with Home Savings Bank, dated December 20, 2016, as amended, which was entered into concurrently with the 2016 Term Loan Agreement, was terminated in conjunction with the new Line of Credit Agreement.

No amounts were outstanding under the existing line of credit agreement at termination.

The Company anticipates amending the Line of Credit Agreement to extend the maturity date in the second quarter of 2020.

At December 20, 2019, the outstanding balance of $1.7 million under the Line of Credit Agreement was paid down with a portion of the proceeds from the New Term Loan Agreement.

No amounts were drawn under the Line of Credit Agreement at March 31, 2020 and December 31, 2019.

No amounts were drawn under the Line of Credit Agreement at June 30, 2020 and December 31, 2019.

Outstanding borrowings under the Line of Credit Agreement bear interest at Prime Rate plus .25%.

At March 31, 2020, the interest rate on the Line of Credit Agreement was 3.50%.

At June 30, 2020, the interest rate on the Line of Credit Agreement was 3.50%.

Borrowings under the Line of Credit Agreement are secured by certain business assets of the Company including accounts receivable, inventory and equipment.

The Line of Credit Agreement also contains certain financial and other covenants, customary representations, warranties and events of default.

Avalon was in compliance with the line of credit agreements covenants at March 31, 2020 and December 31, 2019.

During the three months ended March 31, 2020 and 2019, the weighted average interest rate on outstanding borrowings was 5.00% and 5.36%, respectively.

Obligations under the Company’s debt agreements at March 31, 2020 and December 31, 2019 consist of the following (in thousands):

March 31, 2020

The Line of Credit Agreement contains a Fixed Charge Coverage Ratio requirement of at least 1.20 tested on an annual basis on December 31 of each year.

The Line of Credit Agreement also contains other nonfinancial covenants, customary representations, warranties and events of default.

Avalon was in compliance with the Line of Credit Agreements covenants at June 30, 2020 and December 31, 2019.

Paycheck Protection Program Loan

The Coronavirus Aid, Relief, and Economic Security Act, or (“CARES”) Act, was signed into law on March 27, 2020, and provides over $2.0 trillion in emergency economic relief to individuals and businesses impacted by the COVID-19 pandemic.

The CARES Act authorized the Small Business Administration to temporarily guarantee loans under a new loan program called the Paycheck Protection Program (the “Program”).

The Program provides for 100% federally guaranteed loans to small businesses to allow employers to keep workers employed and maintain payroll during the pandemic and economic downturn.

Under the Program, qualified companies are eligible for a loan in an amount equal to the lesser of $10 million or 2.5x the business’s average monthly payroll.

Collateral or guarantor support is not required for the loan.

Under the Program, the borrower is eligible for loan forgiveness up to the amount the borrower spends on certain eligible costs during the 8 week period beginning on the date the proceeds were received on the loan.

Eligible costs under the Program include payroll costs, interest on mortgage obligations incurred before the covered period, rent on leasing agreements and utility services.

The amount of loan forgiveness is reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees.

Under the Program, proceeds that are not forgiven convert to a loan bearing interest at a fixed rate of 1% payable in 18 equal monthly installments commencing after the forgiveness period.

The Program was subsequently amended to allow the borrower to use an extended forgiveness period of 24 weeks beginning on the date the proceeds were received on the loan and to extend the repayment period to 54 months commencing after the 24 week forgiveness period.

In the second quarter of 2020, certain wholly-owned subsidiaries of Avalon entered into agreements and received a total of approximately $2.8 million in loans under the Program.

The Company is currently utilizing the loan proceeds under the 24 week loan forgiveness period in accordance with Program’s guidelines.

The Company is accounting for the loans in accordance with Accounting Standards Codification (“ASC”) 470 – Debt .

Under ASC 470, the debt will be derecognized when the debt is extinguished in accordance with the guidance in ASC 405-20, Liabilities:

Extinguishments of Liabilities .

When the debt is forgiven in accordance with the Program, any amount that is forgiven will be recognized in the Condensed Consolidated Statements of Operations as a gain on debt extinguishment.

The Company will repay amounts that are not forgiven or utilized.

During the three months ended June 30, 2020 and 2019, the weighted average interest rate on outstanding borrowings was 4.67% and 5.53%, respectively.

During the six months ended June 30, 2020 and 2019, the weighted average interest rate on outstanding borrowings was 4.82% and 5.45%, respectively.

Obligations under the Company’s debt agreements at June 30, 2020 and December 31, 2019 consist of the following (in thousands):

June 30, 2020

Debt Issuance Costs

Term Loan Agreement

Paycheck Protection Program Loans

Less current portion

5 unchanged sentences

Long-term debt

At March 31, 2020, future maturities of long-term debt are as follows (in thousands):

During the three month periods ended March 31, 2020 and 2019, net loss attributable to Avalon Holdings Corporation shareholders was $0.8 million and $0.6 million, respectively.

Avalon recorded a state income tax provision in both the three month periods ended March 31, 2020 and 2019, which was related entirely to the waste management and brokerage operations.

At June 30, 2020, future maturities of long-term debt are as follows (in thousands):

During the three month period ended June 30, 2020, net loss attributable to Avalon Holdings Corporation shareholders was $0.4 million compared to net income attributable to Avalon Common shareholders of $0.5 million for the three month period ended June 30, 2019.

During the six month periods ended June 30, 2020 and 2019, net loss attributable to Avalon Holdings Corporation shareholders was $1.2 million and $0.2 million, respectively.

Avalon recorded a state income tax provision in both the three and six month periods ended June 30, 2020 and 2019, which was related entirely to the waste management and brokerage operations.

Due to the recording of a full valuation allowance against the Company’s federal net deferred tax assets, the overall effective tax rate in both periods reflects taxes owed in certain U.S state jurisdictions.

Avalon’s income tax benefit on the loss before taxes was offset by a change in the valuation allowance.

Avalon’s income tax on the income (loss) before taxes was offset by a change in the valuation allowance.

A valuation allowance is provided when it is more likely than not that deferred tax assets relating to certain federal and state loss carryforwards will not be realized.

Avalon continues to maintain a valuation allowance against the majority of its deferred tax amounts until it is evident that the deferred tax asset will be utilized in the future.

On December 22, 2017, legislation commonly known as the Tax Act was signed into law.

The Tax Act changes existing U.S.

tax law and includes numerous provisions that will affect Avalon, including our income tax accounting, disclosure and tax compliance.

The most impactful changes within the Tax Act are those that will reduce the U.S.

corporate tax rates, business-related exclusions and deductions and credits.

ASC 740, “Income Taxes ,” requires the effects of changes in tax rates and laws on deferred tax balances to be recognized in the period in which the legislation is enacted.

Avalon valued all deferred tax assets and liabilities at the newly enacted Corporate U.S income tax rate.

Avalon has a full valuation allowance on its federal deferred tax assets.

On March 27, 2020, the CARES Act was enacted in response to the COVID-19 pandemic.

The CARES Act, among other things, permits NOL carryforwards generated in taxable years beginning after December 31, 2017, to offset 100% of taxable income for taxable years beginning before January 1, 2021, and 80% of taxable income in taxable years beginning after December 31, 2020.

In addition, the CARES Act allows net operating losses incurred in taxable years beginning after December 31, 2017, and before January 1, 2021, to be carried back to each of the five preceding taxable years to generate a refund of previously paid income taxes.

The Company is currently evaluating the full impact of these provisions and recent IRS guidance, and we expect that it will not have a material impact on the Company’s financial position or results of operations.

Long-T erm Incentive Plan

8 unchanged sentences

The purpose of the Avalon Holdings Corporation 2019 Long-term Incentive Plan (the “Plan”) is (a) to improve individual employee performance by providing long-term incentives and rewards to employees of Avalon, (b) to assist Avalon in attracting, retaining and motivating employees and non-employee directors with experience and ability, and (c) to associate the interests of such employees and directors with those of the Avalon shareholders.

At March 31, 2020, options to purchase 280,000 shares have been granted under the 2009 Plan.

At June 30, 2020, options to purchase 280,000 shares have been granted under the 2009 Plan.

Of these, 12,000 shares have been exercised, and options for 268,000 shares remain outstanding.

30 unchanged sentences

Options cancelled or forfeited

Outstanding at March 31, 2020

Outstanding at June 30, 2020

Options Vested

Exercisable at March 31, 2020

Exercisable at June 30, 2020

The stock options vest and become exercisable based upon achieving two critical metrics as follows:

15 unchanged sentences

96 months after Grant Dates

Compensation costs were approximately $1,000 for both the three months ended March 31, 2020 and 2019, based upon the estimated grant date fair value calculations.

As of March 31, 2020, there was approximately $16,000 of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Plan.

Compensation costs were approximately $2,000 for both the three months ended June 30, 2020 and 2019, and $3,000 for both the six months ended June 30, 2020 and 2019, based upon the estimated grant date fair value calculations.

As of June 30, 2020, there was approximately $15,000 of total unrecognized compensation costs related to non-vested share-based compensation arrangements granted under the Plan.

That cost is expected to be recognized over a weighted-average period of 3.92 years.

11 unchanged sentences

Avalon does not have significant operations located outside the United States and, accordingly, geographical segment information is not presented.

For both the three months ended March 31, 2020 and 2019, no one customer accounted for 10% of Avalon’s consolidated or reportable segment net operating revenues.

For both the six months ended June 30, 2020 and 2019, no one customer accounted for 10% of Avalon’s consolidated or reportable segment net operating revenues.

The accounting policies of the segments are consistent with those described for the consolidated financial statements in the summary of significant accounting policies included in Avalon’s 2019 Annual Report to Shareholders.

2 unchanged sentences

Three Months Ended

Six Months Ended

Net operating revenues from:

10 unchanged sentences

Total net operating revenues

Three Months Ended

Six Months Ended

Income (loss) before income taxes:

5 unchanged sentences

General corporate expenses

Loss before income taxes

Income (loss) before income taxes

Identifiable assets:

2 unchanged sentences

Elimination of intersegment receivables

In comparing the total assets at March 31, 2020 with those at December 31, 2019, the decrease in the total assets of the waste management services segment of $0.7 million is primarily a result of a decrease in accounts receivable partially offset by an increase in intersegment transactions, which are eliminated in consolidation.

In comparing the total assets at June 30, 2020 with those at December 31, 2019, the decrease in the total assets of the waste management services segment of $3.1 million is primarily a result of a decrease in accounts receivable partially offset by an increase in intersegment transactions, which are eliminated in consolidation.

The increase in total assets of the golf and related operations segment of $3.2 million was primarily due to an increase in accounts receivable and capital expenditures related to the expansion of The Grand Resort partially offset by current year depreciation on property and equipment.

The decrease in corporate total assets of approximately $0.6 million is primarily due to an a decrease in restricted cash utilized for the expansion of The Grand Resort partially offset by an increase in intersegment transactions, which are eliminated in consolidation.

The increase in corporate total assets of approximately $2.8 million is primarily due to an increase in cash and cash equivalents and intersegment transactions, which are eliminated in consolidation, partially offset by a decrease in restricted cash utilized for the expansion of The Grand Resort.

Certain Relationships and Related Transactions

7 unchanged sentences

As a result of a private placement offering, Avalon is not the majority owner of AWMS Holdings, LLC.

At March 31, 2020 and December 31, 2019, respectively, Avalon owns approximately 47% of AWMS Holdings, LLC.

At June 30, 2020 and December 31, 2019, respectively, Avalon owns approximately 47% of AWMS Holdings, LLC.

In accordance with ASC 810-10 and related amendment , due to the managerial control of American Water Solutions, LLC, AWMS Holdings, LLC is a variable interest entity, and the financial statements of AWMS Holdings, LLC and subsidiaries are included in Avalon’s consolidated financial statements.

49 unchanged sentences

The total amount of outstanding debt under the Agreements assumed by Havana Cigar Shop, Inc., at closing was approximately $0.8 million which consisted of approximately $0.1 million under the Demand Line of Credit and $0.7 million under the Commercial Mortgage agreement.

The outstanding balance under the Commercial Demand Line of Credit was repaid in the third quarter of 2019 and in the fourth quarter of 2019 the Commercial Demand Line of Credit was terminated.

The outstanding balance under the Commercial Demand Line of Credit was repaid in the second quarter of 2019 and in the fourth quarter of 2019 the Commercial Demand Line of Credit was terminated.

The remaining outstanding balance under the Commercial Mortgage was refinanced and terminated in conjunction with the New Term Loan Agreement (See Note 9).

32 unchanged sentences

On March 11, 2020, the World Health Organization declared the COVID-19 viral disease a pandemic.

The duration of the outbreak and new information which emerges concerning the severity of the illness and its treatment still remains unclear.

The duration of the outbreak and new information which continually emerges concerning the severity of the illness and its treatment still remains unclear.

As a result, the federal and state governmental bodies have taken unprecedented measures to try and control the spread of the virus.

7 unchanged sentences

The Stay at Home Order required all non-essential businesses to cease operations.

On March 2020 the Governor of the state of Pennsylvania issued a similar Stay at Home order.

In March 2020 the Governor of the state of Pennsylvania issued a similar Stay at Home order.

Under the order, all non-essential businesses were required to cease operations.

In accordance with the “Essential Critical Infrastructure Workforce” guidance issued by the U.S Department of Homeland Security, Cybersecurity & Infrastructure Agency (“CISA”) on March 19, 2020, the Company’s waste management services, restaurant carry-out, overnight lodging and outdoor golf courses have remained in operation.

In May 2020, the state of Ohio began the gradual phased process of reopening certain businesses that were temporarily closed under the Order.

In Ohio, the Company’s dining rooms, salon and spa services can reopen under certain mandatory restrictions.

Fitness and athletic operations are temporarily closed in accordance with the Order.

In Pennsylvania, the Company’s in-house dining, fitness, athletics, salon and spa operations are temporarily closed in accordance with the Order.

The continued spread of COVID-19 and related governmental orders have adversely impacted our operations and related financial results.

We expect our restaurant operations to generate significantly lower revenue as a result of the government mandated restrictions placed on in-house dining.

In addition, the Company has seen high levels of room and event cancellations through the third quarter of 2020 with some tentative re-bookings in the fourth quarter and into 2021.

In late May and June 2020, the states of Ohio and Pennsylvania allowed the reopening of certain business operations that were temporarily closed under the Order.

The Company’s dining rooms, fitness, athletic, pool, salon and spa services reopened under certain mandatory restrictions including mask protection for employees, decrease in occupancy and other measures to enforce social distancing.

The continued spread of COVID-19 and related governmental orders adversely impacted our operations and related financial results.

Our restaurant operations generated significantly lower revenue as a result of the government mandated restrictions that were placed on in-house dining.

Food and beverages sales related to banquets and conferences were minimal during the second quarter of 2020 as a result of government mandated restrictions placed on gatherings and events.

In addition, the Company had high levels of room and event cancellations with some re-bookings in the third and fourth quarter of 2020 and into 2021.

Our fitness, athletics, salon and spa operations generated no revenue under the mandate.

We cannot predict the duration of the mandate or any limitations the government may impose on our operations, which may include, among others, mask protection as well as other measures to enforce social distancing measures.

In addition, our waste management brokerage business has experienced a decline in both continuous and project work due to government restrictions placed on its customers and associated shutdowns.

As government restrictions are reduced or lifted, we may experience weakened demand in light of continued travel restrictions or warnings, consumer fears and reduced consumer discretionary spending and general economic uncertainty.

In light of the foregoing, we are unable to determine when our operations will return to pre-pandemic demand or pricing.

During this time, the Company has engaged in aggressive efforts to reduce expenses, including reducing employee costs, through hiring freezes, headcount reductions and substantial furloughs of employees.

Subsequent Event

Paycheck Protection Program

In the second quarter of 2020, certain wholly-owned subsidiaries of Avalon entered into agreements to receive a total of approximately $2.8 million in loans under The Paycheck Protection Program contained in The Coronavirus Aid, Relief, and Economic Security (“CARES”) Act.

The Paycheck Protection Program (the “Program”) provides for 100% federally guaranteed loans to small businesses to allow employers to keep workers employed and maintain payroll during the pandemic and economic downtown.

Under the Program, qualified companies are eligible for a loan in an amount equal to the lesser of $10 million or 2.5x the business’s average monthly payroll.

Collateral or guarantor support is not required for the loan.

Under the Program, the borrower is eligible for loan forgiveness up to the amount the borrower spends on certain eligible costs during the 8-week period beginning on the date of the origination of the loan.

Eligible costs under the Program include payroll costs, interest on mortgage obligations incurred before the covered period, rent on leasing agreements and utility services.

The amount of loan forgiveness is reduced if there is a reduction in the number of employees or a reduction of greater than 25% in wages paid to employees.

Under the Program, a reduction in employment or wages that occurred during the period beginning on February 15, 2020 and ending 30 days after enactment of the CARES Act do not reduce the amount of loan forgiveness if by June 30, 2020 the borrower eliminates the reduction in employees or reduction in wages.

Under the Program, proceeds that are not forgiven convert to a loan bearing interest at a fixed rate of 1% payable in 18 equal installments commencing in November and December 2020.

The Company anticipates that it will utilize the proceeds in accordance with the Program’s guidelines and repay amounts that are not forgiven or utilized.

During the mandated shut-down, the Company engaged in aggressive efforts to reduce expenses, including reducing employee costs, through hiring freezes, headcount reductions and substantial furloughs of employees.

The Company began the process of rehiring employees in late May to meet business needs as the government restrictions on certain of our business operations were reduced or lifted.

Governmental bodies may impose additional restrictions, which could include additional shutdowns, to stop the spread of infection.

These additional restrictions would have a negative impact on our financial condition, results of operations and cash flows.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements